Even the World’s Most Cashless Nation Doesn’t Want to Go Fully Cashless

It’s too risky and systematically excludes the most vulnerable people.

There are small but growing signs that Europe’s “War on Cash” is not going exactly according to plan. First, a number of central bankers began voicing concerns about its potential ramifications. Now, even in Sweden, the first European country to enlist its own citizens as largely willing guinea pigs in an economic experiment — negative interest rates in a cashless society — public support is beginning to waver.

Initially, the plan was so successful that by 2017 the amount of cash in circulation had dropped to the lowest level since 1990 and was more than 40% below its 2007 peak, earning Sweden a reputation as the world’s “most cashless nation.” The declines in 2016 and 2017 were the biggest on record. An annual survey by Insight Intelligence found that in 2017, only 25% of Swedes paid in cash at least once a week, down from 63% just four years before; and 36% never used cash at all, or just pay with it once or twice a year.

But that doesn’t mean everyone is on board. In a recent survey, an overwhelming 68% of the respondents stated that they would not like to live in a fully cashless society. The survey, commissioned by Bankomat AB, an ATM chain company representing an alliance of Swedish banks that admittedly has a vested interest in preserving cash’s role as a means of payment, polled over 2,000 people aged 18-65.

Opinions differed markedly between age groups but in no single demographic was there a majority in favor of abolishing physical currency. Among the 18-29 year old respondents 56% declared that they still want to keep cash while 38% said they would welcome a cashless society. Among the survey’s oldest demographic, the 65-year-olds, 85% wanted to keep cash.

Only one in four Swedish people support a fully cashless nation. The views on cash expressed in the survey varied sharply between inhabitants of small towns and those in large cities. The proportion of cash advocates was lowest in the country’s capital Stockholm, and highest in more rural areas such as Västmanland, Värmland and Kalmar counties.

The survey’s findings were published as the pace at which cash is vanishing in Sweden is even beginning to worry the same authorities that wanted to get rid of it. If physical money disappears too quickly, it could be difficult to maintain the infrastructure for handling cash, one Swedish official recently warned. And that may be enough to spark a crisis.

Most of the country’s bank branches have stopped handling cash altogether and many shops and restaurants now only accept plastic or mobile payments. As a result, many people who struggle to navigate the digital system, or who don’t have credit cards, in particular the elderly, are finding themselves increasingly locked out of the country’s payment system.

This trend underscores one of the oft-ignored benefits of physical cash: its universality. “The easy accessibility to cash, especially for the elderly, the socially vulnerable or minors, allows people to participate in society and, for example, allows children to learn how to handle money,” Yves Mersch, a member of the ECB’s executive board, said in a speech last month. “In particular, when socially vulnerable people use cash, they face none of the barriers involved in applying for a credit card or, despite all their efforts, opening a current account.”

Sweden’s parliament has launched a review on the impact of going cashless too quickly after fears that it dramatically excludes the financial needs of the elderly, children and tourists who rely on cash. A committee of Sweden’s central bank, the Riksbank, hopes to publish a report on the expected outcomes of a cashless Sweden by summer 2018.

The Riksbank is the world’s oldest central bank but it could become the first to issue its currency in electronic format, the e-kronor. “Three hundred and fifty years ago we replaced large copper coins with notes. Notes could now be replaced with electronic notes and coins,” the Riksbank governor, Stefan Ingves, told Sydsvenskan. The Riksbank could in principle release an electronic hundred kronor note, he said, but digital currency would not need to be divided the same way as physical notes:

“We’re thinking about it. But if you’re releasing electronic money it can be divided in a different way than notes. We wouldn’t use an electronic 100 kronor note if we’re buying something for 98 kronor. Nor would we use two kronor in electronic change. It would work just as well with a 98 kronor note.”

But Ingves insisted that Sweden’s national electronic currency would not replace physical cash altogether as that would create a problem in times of crisis, adding: “If the power supply is cut it’s no longer possible to make electronic payments. For reasons based purely in preparedness we need notes and coins that work without electricity.”

In Puerto Rico electronic payment systems were down for weeks following Hurricane Maria last September, essentially turning the island into a cash-only economy. Corporate clients of the New York Federal Reserve made urgent requests for large amounts of dollars in cash to meet payrolls, and ultimately the Fed dispatched a jet loaded with an undisclosed amount of cash to the stricken island.

Perhaps having drawn a lesson from this experience, the governor of Sweden’s Riksbank is now considering forcing all of Sweden’s banks to continue providing cash to customers. “It’s reasonable for banks to be expected to handle money,” he said. “You should be able to deposit money in the form of notes. You should be able to take out money. A ban on cash goes against the public perception of what money is and what banks do.”

It’s yet another sign that perhaps Europe’s war on cash has reached the limits of its practicability — at least for now! Apparently, even the people of the world’s “most cashless nation” don’t want to go fully cashless. And most incredibly, the leader of its central bank appears to agree with them. By Don Quijones.

People do not really want large companies watching all their financial transactions and using that data to figure out how to prey on them even more. People are willing to put up with some of that in exchange for purchasing convenience, especially if it seems like it also helps prevent other social evils (e.g. making petty crimes inconvenient), but there’s a limit.

So no, people will NOT want a cashless society, not without much stronger privacy to go with it.

Otherwise your transaction data simply becomes even more fodder for everyone who wants to exploit you.

But as a person who buys most things online (excl. food & housing & gasoline) I prefer the convenience of a Credit Card, and also the superior anti-fraud protection my major bank card-supplier affords me. It works !

I cannot conveniently use cash online, obvious that.

To me, the C.C. payment is effectively a cash payment, online. Especially given that I pay off the C.C. , incrementally, as I make purchases, and ahead of the billing cycle.

YET I KNOW THAT ALL OF THIS ONLINE PURCHASING, enabled by bank-credit, feeds this interweb thing (i) w/my personal knowledge for (ii) the Google and other advertising beasts — with valuable and quite salable knowledge.

I’m a few years younger, but your comment summed up exactly our own attitude towards cash and purchases. We have a few favourite restaurants we go for lunch every two or three weeks, but I always pay in cash with an included generous tip. After thanking the owner or server we quickly leave before the bill is rung up leaving them the option to declare as they see fit. One little restaurant only accepts cash, nothing else. I also buy a lot of local lumber and do the same cash payment, often leaving extra ‘on account’ for the next load. The owner allows me to come and go as needed, (the gate is left open for me), picking out my own lumber and leaving my own tally which I pin up on a bulletin board. Even the watch dogs come out and lick my hands. :-) What do I get for paying cash? The best clear old growth lumber on the Planet and great meals with generous portions.

Gas and online is for the credit card and is paid off when the bill arrives.

I recently sold a woodstove to someone who lives 100 miles away and two ferry rides over. He paid for the stove with an email bank transfer, something new for me. It was quite painless though. The only surprise was the buyer paying $1200 dollars for a stove sight unseen. I did send on a picture but it was good enough for him. In a week or two I will meet up with him in town somewhere and unload the stove into his truck.

We couldn’t operate around here without cash. If they take it away we’ll figure out a way around.

Mary

Mar 27, 2018 at 6:52 pm

I’m curious about this sentence: “After thanking the owner or server we quickly leave before the bill is rung up leaving them the option to declare as they see fit”. Are you making it easy for them not to declare income? Not to give the full tip to your server?

But interesting comment. Sounds like you are heading towards a barter economy.

Frederick

Mar 27, 2018 at 11:54 am

Cash is good Physical gold and Silver are far better though Petro- Yuan anybody?

“and ultimately the Fed dispatched a jet loaded with an undisclosed amount of cash to the stricken island.”

Did T$$$p order that?

Barry Fay

Mar 27, 2018 at 12:24 pm

Cashless society = 1984 in spades

Enrique

Mar 27, 2018 at 12:49 pm

What. Happens. When. The. Power. Goes. Out?

See also, “Internet of Things” nonsense.

Is it too difficult to have functional system redundancy so that it is not always a zero-sum game with everything? Rhetorical question, I know, but seems not to be getting asked enough.

RepubAnon

Mar 27, 2018 at 2:10 pm

That’s it – ever been in a restaurant when the power goes out, and all the electronic cash registers stop working? Now imagine if the Internet goes down in a cashless society. Battery backups won’t help…

Cynic

Mar 28, 2018 at 6:17 am

A few months ago I cycled into town, and no less than three shops in a row had to turn away my business -quite a bit! – as the tills weren’t working and they couldn’t handle a pen and paper cash transaction. Even the bank was limited in what it could do for me. Pretty dumb.

Old Engineer

Mar 27, 2018 at 2:07 pm

Well, a cashless society would get rid of beggars, buskers, itinerant tree cutters, and most lawn care people and a number of the homeless. Imagine the people who walk up asking for money whipping out a smartphone with a credit card reader! If the U.S. were to try to eliminate U.S. government printed cash then somebody else’s cash would just take its place. Russian rubles, Chinese Yuan, I’m sure they’d be thrilled.
Getting rid of cash is a pipe dream.

Mike G

Mar 27, 2018 at 5:06 pm

If the U.S. were to try to eliminate U.S. government printed cash then somebody else’s cash would just take its place. Russian rubles, Chinese Yuan, I’m sure they’d be thrilled.

Good point. If Sweden pushes cashlessness further than people want to go, they’ll just start trading Euros with each other and the government loses the taxes and seigniorage.

Old Engineer – the Randist techbros would love to be able to starve beggars, buskers, itinerent tree trimmers and window washers and anyone else who doesn’t fit into their Sim City view of the world.

But you are right, they won’t. We’ll use Indian, Chinese, Russian money if we have to.

JungleJim

Mar 27, 2018 at 2:24 pm

Going cashless has nothing to do with convenience, it is about control, pure and simple. It fits perfectly with the obscene data collection by Google and Fakebook, and the militarization of the police. George Orwell would be proud.

Michael B Bickell

Mar 27, 2018 at 2:52 pm

Sweden is not the only country trying to eliminate cash.

Today, as a recent touristic arrival in France, I went grocery shopping in a store of a nation-wide supermarket chain, and was told I had to return everything in my trolley when I tried to pay with cash purchased in the UK before arrival for this express purpose.

The youthful cashier just looked in puzzlement at me when I tried to argue cash was legal tender (admittedly in very rusty franglais).

Green Rock

Mar 27, 2018 at 4:47 pm

That’s why France is a camping ground.
It’s part of the plan…..do we want what they have? No.

Robert

Mar 28, 2018 at 9:16 am

I hope you told him where to stick his trolley (or did he threaten to sic the Thought Police on you) (Descartes, where are you?)

raxadian

Mar 27, 2018 at 3:24 pm

Considering the Eurozone, specially Spain and Italy lately, are trying to beat Latin America in “number of banks that screw you over and or crash and burn”, is not surprising.

A no cash society means the banks own you. If anything bad happens you are left with nothing. And is not like the Eurozone is lacking on recent examples.

Although pension funds are trying their hardest to beat the banks in being unreliable.

Also the US and the Eurozone would be doomed if society really goes cashless, they are way too dependant on the Dollar and Euro. And in a cashless society the only difference in currency would be a small conversion fee.

WES

Mar 27, 2018 at 6:28 pm

When there is a power failure, e-cash doesn’t work. Only cash works!

In any given year we all experience some power outages due to weather storms, some backhoe digging up a local power cable by accident, or a raccoon climbing into a power transformer.

BoyfromTottenham

Mar 27, 2018 at 7:38 pm

If cash is banned, the ‘cash economy’ which I am sure exists in every country will simply find a way around it, e.g. by barter or agreeing to use some proxy like a stable, readily available foreign currency. This however is not progress, quite the reverse IMHO. Are the politicians that propose banning cash really that lacking in their understanding of how the real world works, or are they just bullies?

Cynic

Mar 28, 2018 at 6:14 am

Politicians: people who believe that their index-linked pensions grow on trees, which are watered at the roots with the blood and tears of peasants.

If not always dumb, or invariably bullies, they are disconnected and indifferent to the masses, except as voting fodder.

mean chicken

Mar 28, 2018 at 12:16 am

On the bright side, this enables robust growth in the welfare sector.

Realist

Mar 28, 2018 at 5:03 am

Riksbank did issue paper notes 300 years ago, a couple of years later they got the bright idea to issue a lot of paper notes and the Swedish currency did collapse due to inflation caused by excess printing. The Chinese did the very same thing a lot earlier, though.

During the wars of Carolus XII Sweden did issue small coppercoins with a face value of one silver dollar and thus they did destroy the value of money once more. That particular time the secretary of the Exchange lost his head.

The signs are promising for the e-krona.

d

Mar 29, 2018 at 3:06 am

” The Chinese did the very same thing a lot earlier, though. ”

The Chinese did the very same thing MANY TIMES a lot earlier, though.

AND GUESS WHAT.

They are doing it again today with CNY/RMB.

chian is the global poster child of Civil Wars at the root of every one of those Civil Wars since they started using printed money, was Excessive Money Printing.

Many times in china it has been made punishable by death, to settle accounts in Bullion instead of the Emperors printed used toilet paper. The CCP Dynasty (which is what it is becoming) will be no different.

It will be a sign of how close the end is.

marco

Mar 28, 2018 at 6:47 am

I’m sure the bankers in every country have all of our best interests at heart.

George McDuffee

Mar 28, 2018 at 7:07 pm

In a recent survey, an overwhelming 68% of the respondents stated that they would not like to live in a fully cashless society.
This assumes the population/respondents have some say in the matter.

As a result, many people who struggle to navigate the digital system, or who don’t have credit cards, in particular the elderly, are finding themselves increasingly locked out of the country’s payment system.
This is a concern only if you are a “normal” person. The 0.1 % see the exclusion of the “marginal” from “their” cities as a benefit. It also helps control illegal immigration and street crime such as street walkers and retail drug sales.

upwising

Mar 28, 2018 at 8:45 pm

Well, in my “Hymnal for Life in Century XXI,” Hymn #1 is “Hail Technology — It Shall Set Us Free” but I think it will be necessary to add another stanza for he “JOYS” of a cashless society.

Sometimes I just can’t believe how much time disappears down a black hole, jerking around with “labour-saving technology.”

KPL

Mar 28, 2018 at 11:03 pm

After what happened in Greece and Cyprus, it is a wonder that people in Sweden, or for that matter any country, could think of going cashless!

But then, people always seem to believe in propaganda (reduce crimes, drugs etc.)!

VegasGuy

Mar 29, 2018 at 11:31 am

Iceland should be the first country to go cashless…spent two weeks there and never used cash once. I don’t even know what it looks like. I drove the island from small village to the Capitol never needed and merchants preferred cads not cash.

Someone

Apr 1, 2018 at 1:21 pm

In the good ole USA, at one point some ghetto neighborhoods were using Tide as a form of currency. Dollar stores and such were locking it up so as not to be stolen.